Exclusive: Import duty hike forces Triumph Motorcycles to ‘rethink’ India plans

British premium motorcycle brand Triumph Motorcycles said is re-evaluating  its India plans after pleas to the finance ministry to reconsider the customs duty hike failed to draw a positive response.

The Union Budget saw an increase in customs duty on completely knocked down (CKD) kits to 15 percent on all types of vehicles including two-wheelers, from the earlier 10 percent. This has led to a direct and indirect increase in prices by up to 6 percent.

In an interaction with Moneycontrol, country managing director Vimal Sumbly said it is unfair that those manufacturers who import from Thailand  are benefitting the most as they are taxed at the lowest level possible — 10 percent.

“In situations like these when I report to my headquarters in the UK, it becomes difficult to convince them to invest more in India. When the idea is to ‘Make in India’, a call given by the government, there is a hike on tax on CKD units whereas Thailand Free Trade Agreement protects other manufacturers,” Sumbly said.

“We had the option of importing from Thailand directly like others instead of making the bikes in India. But we went ahead to invest in a local facility here,” added Sumbly.

When asked specifically if Triumph will rethink about its India plans Sumbly said, “Yes certainly, now we would have to if the situation does not change".

Triumph is one of the several companies who are hit by the hike in duty as the company assembles its bikes through the CKD route from kits imported from the UK. Rival Harley-Davidson is also at the losing end since it also makes cruisers in India.

On the other hand manufacturers like Honda are benefiting indirectly from the hike in customs duty since they import from Thailand. In like-to-like comparison there is now a price difference of a minimum of Rs 50,000 between those bikes which are assembled in India and those which are imported from Thailand.

“At least 90 percent of our products sold in India are assembled at our plant in Haryana. Last year 90 percent of our products were imported as fully built units from the UK”, added Sumbly.

As an ad hoc arrangement the Indian government slashed customs duty on fully imported bikes last month to a flat 50 percent from an earlier 60 percent and 75 percent. BMW Motorrad, Benelli, Hyosung, MV Agusta, SMW, Honda, Yamaha, Kawasaki and Suzuki either have an assembly plant in the country or have plans to set up one soon.

The hike in duty has forced luxury car makers like Mercedes-Benz, BMW, Audi and Jaguar Land Rover to increase their prices too by around 3-5 percent.